Cwp/13146/2016 Of M/S Jindal Steel & Power Ltd v. The Principal Commissioner Of Income Tax Gurgaon & Anr

IN THE, HIGH COURT OF PUNJAB & HARYANA ATCHANDIGARH Civil Writ Petition No. 13146 of 2016Date of Decision: 21.09.2016 M/s Jindal Steel and Power Ltd. through its authorized signatoryMr. Ajay Sehgal. _ Petitioner VeTSUS The Principal Commissioner of Income Tax, Gurgaon and another ..Respondents CORAM:HON'BLE MR. JUSTICE S.J.VAZIFDAR, CHIEF JUSTICE. HON'BLE MR. JUSTICE DEEPAK SIBAL, JUDGE. Present :Mr. Ajay Vohra, Senior Advocate with — Mr. Rohit Jain, Advocate, for the petitioner. Mr. Yogesh Putney, Advocate, for the respondents. | AK AI S.J.VAZIFDAR, CHIEF JUSTICE The petitioner has challenged an order of respondent No.1-Principal Commissioner of Income Tax (Pr.CIT) dated 14.06.2016 rejectingits application to stay the recovery of the demand of about Rs.277 crores tillthe disposal of its appeal before the Commissioner of Income Tax (Appeals). By a further order dated 26.08.2016, respondent No.1 rejected thepetitioner’s application for claritication/modification. A copy of this orderwas tendered in Court. | 2The petitioner sought a stay of the recovery of the demand ofaboutL277 crores till the disposal of its appeal before the Commissioner Of | Income Tax (Appeals). In the alternative and based on instructions issued bythe CBDT dated 29.02.2016 the petitioner sought a stay of the demand upon its paying a reasonable part of the demand not exceeding 15% of the totaldemand. By the main order dated 14.06.2016, the petitioner was granted aStay subject to it depositing Rs.41.64 crores which constituted 15% of thetotal demand. The order further permitted the Assessing Officer to adjustany refund which may arise in favour of the assessee company in anyassessment year. The petitioner contends that this right to adjust the refund islimited to the amount of Rs.41.64 crores directed to be deposited as acondition of stay. The authorities, however, interpreted the order to authorizethem to adjust any refund against the total tax demand of about Rs.277crores. The petitioner, therefore, sought a clarification of the order dated14.06.2016. By an order dated 26.08.2016, respondent No.1 while rejectingthe application did not interpret the order dated 26.08.2016 but insteadrelying upon the instructions dated 02.02.1993 issued by the CBDT held thatthe Assessing Ofticer/Department may reserve the right to adjust the refundagainst demand. We have held that in any event the same would be contraryto the instructions issued by Central Board of Direct Taxes (CBDT) dated29 022016 which modified the circular dated 02.02.1993. | 3 |As the petitioner seeks a stay of the demand, it is necessary torefer to the facts only brietrly. 4The original assessment order is dated 27.12.2010. The total taxdue was computed atL230.57 crores. The total tax paid was about|=181.74.crores. The Assessing Officer initiated proceedings of penalty under section271(1)(C) of the Income Tax Act, 1961 (for short ‘the Act’). Mr. Vohra, the learned senior counsel appearing on Dehalf of the petitioner invited our attention to the observation in the assessment orderto the effect that the books of account were produced and checked. He also relied upon the assessment order in so far as it dealt with the petitioner’scase for deductions under sections 80I[A and 80IB ot the Act in considerabledetail. The petitioner’s claim for deduction under section 80IA of Rs.429crores was restricted to Rs. 203.80 croresSimilarly, the petitioner’s claimfor deduction under section 80IB was restricted to Rs. 65.75 crores. Mr. Vohra, the learned senior counsel appearing on Dehalf of the petitioner invited our attention to the observation in the assessment orderto the effect that the books of account were produced and checked. He also relied upon the assessment order in so far as it dealt with the petitioner’scase for deductions under sections 80I[A and 80IB ot the Act in considerabledetail. The petitioner’s claim for deduction under section 80IA of Rs.429crores was restricted to Rs. 203.80 croresSimilarly, the petitioner’s claimfor deduction under section 80IB was restricted to Rs. 65.75 crores. 5.|The petitioner’s appeal against the assessment order wasdisposed of by the order of the Commissioner of Income Tax (Appeals)dated 11.07.2011. Thereafter the revisionary jurisdiction under section 263°ot the Act was invoked on issues other than under section 80IA and 80IB.Mr. Vohra relied upon the proceedings under section 263 of the Act’ toindicate that the petitioner’s record had been examined more than once. Herelied upon the order of the CIT(A) to contend that as the assessment orderhad merged into the order of the CII(A) and that, therefore, thereassessment proceedings were barred. 6.Bya letter dated 24.03.2015 the Assessing Officer informed thepetitioner that he had reason to believe that its income for the assessmentyear 2008-09 had escaped assessment within the meaning of section 147 ofthe Act. The assessee was directed to file a return within 30 days.7.Under cover of a letter dated 23.07.2015 the Assessing Officerforwarded to the petitioner the reasons recorded for reopening theassessment. The petitioner’s objections were invited by 27.07.2015. Themain reason was that the petitioner had not maintained separate books ofaccount. It was also noted that the petitioner had not explained how thevalue of coal mines, rejected coal, cost of steam, direct and overheadexpenses had been computed and that there were no details andDills/vouchers (with costing) in respect of the coal and iron-ore purchases and unitwise use thereot. The Assistant (Commissioner of Income Tax alsomentioned that there was no record to show that various aspects had beenexamined before the Assessing Officer made the original assessment order.He stated that he had reason to believe that on account of the petitionerhaving failed to disclose fully and truly all material facts necessary for itsassessment the income had escaped assessment for the assessment year2008-09. 8.The petitioner filed its objections. The petitioner inter-alia.contended that the claim for deduction under section 80[A and 80IB had§been verified during the original assessment proceedings as also in respect ofthe previous assessment years commencing from 2000-01; that there was nofailure to disclose the material facts; that the reassessment was based only onChange of opinion; that the reassessment was barred under the third provisoto section 14/in view of the order of CIT(A) dated 11.07.2011 and that thereassessment was barred under section 149 as the reasons alongwith thenotice under section 148 and sanction under section 151 were not'communicated. 9 |The Assessing Officer dismissed the objections by an orderdated 28.03.2016. Thereafter the Assessing Officer passed the reassessmentorder dated 31.03.2016 disallowing the entire claim for deduction undersection 80JA and 80IB of an aggregate amount of about 492 crores. 10.We do not wish to express any opinion on the correctness ofthese grounds of challenge as they are the subject matter of appeal before theCIT(A) against the order dated 28.03.2016 dismissing the petitioner’sobjections and the reassessment order dated 31.03.2016. | 11.The petitioner filed Civil Writ Petition No. 6983 of 2016against the reassessment order. The Writ Petition, however, was disposed ofby an order and judgment dated 09.05.2016. The Division Bench relegatedthe petitioner to the alternative remedy of an appeal before the CIT(A). Themerits of the matter were not dealt with. 10.We do not wish to express any opinion on the correctness ofthese grounds of challenge as they are the subject matter of appeal before theCIT(A) against the order dated 28.03.2016 dismissing the petitioner’sobjections and the reassessment order dated 31.03.2016. | 11.The petitioner filed Civil Writ Petition No. 6983 of 2016against the reassessment order. The Writ Petition, however, was disposed ofby an order and judgment dated 09.05.2016. The Division Bench relegatedthe petitioner to the alternative remedy of an appeal before the CIT(A). Themerits of the matter were not dealt with. 12.It is in these circumstances that the petitioner filed an appealbefore the Commissioner of Income Tax (Appeals) against the reassessmentorder dated 31.03.2016. 13.On 29.04.2016, the petitioner made an application for staybefore the Assessing Officer which was disposed of by an order dated09.05.2016. The order contains no reasons whatsoever. It only observed thatthe mere filing of an appeal did not entitle the appellant to a stay. It is notnecessary to deal with the correctness of this order for ultimately thepetitioner carried the matter to the first respondent-Principal, Commissionerof Income Tax, Gurgaon (Pr. CIT) who passed the impugned order dated14.06.7016. 14.Before referring to the impugned order it is necessary to refer toSection 220 and a circular issued under section 119 of the Act in respect ofthe provisions of section 220(6) of the Act. Section 220(6) of the Act readsas under:-. 6When tax payable and when assessee deemed in.default. 220(6) Where an assessee has presented an appeal|under section 246 or section 246A the Assessing Officer|may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the|case, treat the assessee as not being in default in respect|of the amount in dispute in the appeal, even though the|time tor payment has expired, as long as such appeal|remains undisposed of.”under section 246 or section 246A the Assessing Officer|may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the|case, treat the assessee as not being in default in respect|of the amount in dispute in the appeal, even though the|time tor payment has expired, as long as such appeal|remains undisposed of.” 15.The Central Board of Direct Taxes (CBDT) had initiallyissued instruction No. 1914 dated 02.02.1993 which was clarified by |instructions dated 21.03.1996. They contain the guidelines issued by theBoard regarding the procedure to be followed for recovery of theoutstanding demand including the procedure for grant of stay of demand.Further instructions titled ‘Oftice Memorandum (F.No.404/72/93-ITCC)dated 29.02.2016 were issued in order to streamline the process of grantof stay. It is necessary to set out the entire Office Memorandum for thismatter turns essentially on our interpretation of it. It reads as follows:- “ORFICE|MEMORANDUM.[F.NO.404/ 72 /9ITCC], DATED 29-2-2016 Instruction No. 1914 dated 21-3-1996 contains guidelinesissued by the Board regarding procedure to be followed|for recovery of outstanding demand, including procedure|for grant of stay of demand. 2.In part “‘C’ of the Instruction, it has been prescribedthat a demand will be stayed only if there are valid|reasons for doing so and that mere filing of an appeal|against the assessment order will not be a sufficient|reason to stay the recovery of demand. It has been furtherprescribed that while granting stay, the field officers may.require the assessee to offer a suitable security (bank|guarantee, etc.) and/ or require the assessee to pay alreasonable amount in lump sum or in instalments.OQ.It has been reported that the field authorities ofteninsist on payment of a very high proportion of the|disputed demand before granting stay of the balance.demand. This often results in hardship for the taxpayers.seeking stay of demand. 2.In part “‘C’ of the Instruction, it has been prescribedthat a demand will be stayed only if there are valid|reasons for doing so and that mere filing of an appeal|against the assessment order will not be a sufficient|reason to stay the recovery of demand. It has been furtherprescribed that while granting stay, the field officers may.require the assessee to offer a suitable security (bank|guarantee, etc.) and/ or require the assessee to pay alreasonable amount in lump sum or in instalments.OQ.It has been reported that the field authorities ofteninsist on payment of a very high proportion of the|disputed demand before granting stay of the balance.demand. This often results in hardship for the taxpayers.seeking stay of demand. 4.In order to streamline the process of grant of stay and|standardize the quantum of lump sum payment required|to be made by the assessee as a pre-condition for stay ofdemand disputed before CIT (A),the following modifiedsuidelines are being issued in partial modification ofInstruction No. 19143A) In a case where the outstanding demand is disputed|beforeCIT.(A),the assessing.officershallgrantstay of demand till disposal of first appeal on payment of15% of the disputed demand, unless the case falls in the|category discussed in para (B) here under. (B) In a situation where, (a) the assessing officer is of the view that the)natureof addition resultinginthe|disputed demand is such that payment of a lump)sum amount higher than 15% is warranted (e.g. in| Q9 case where addition on the same issue has beenconfirmed by appellate authorities in earlier years|OT|the.decisionOT the SupremeCourtOT|jurisdictional High Court is in favour of Revenueor addition is based on credible evidence collected|in a search or survey operation, etc.) or, (b) the assessing officer is of the view that thenatureof addition resulting1N the|disputed demand is such that payment of a lump)sum amount lower than 15% is warranted (e.g. inacase where addition on the same issue has been!deleted by appellate authorities in earlier years orthe decision of the Supreme Court or jurisdictional|High Court is in favour of the assessee, etc.), the)assessing officer shall refer the matterto theadministrative Pr. CIT/CIT, who after consideringallrelevantfactsshalldecidethequantum/proportion of demand to be paid by the’assessee as lump sum payment for granting)a stay of the balance demand. (C) In a case where stay of demand is granted by the|assessing officer on payment of 19% of the disputed|demand and the assessee is still aggrieved, he may|approach the jurisdictional administrative Pr. CIT/CIT for|a review of the decision of the assessing officer. (D) The assessing officer shall dispose of a stay petition|within 2 weeks of filing of the petition. If a reference has|been made to Pr. CIT/CIT under para 4 (B) above or a|review petition has been filed by the assessee under para|4 (C) above, the same shall also be disposed of by the Pr.CIT/CIT within 2 weeks of the assessing officer making.such reference or the assessee filing such review, as the|case may be. (E) In granting stay, the Assessing Officer may impose.such conditions as he may think fit. He may, inter alia,-such conditions as he may think fit. He may, inter alia,- (1) require an undertaking from the assessee that)he will cooperate in the early disposal of appealfailing which the stay order will be cancelled;he will cooperate in the early disposal of appealfailing which the stay order will be cancelled; (ul) reserve the right to review the order passed after|expiry of reasonable period (say 6 months) or if the|assessee has not co-operated in the early disposalof appeal, or where a subsequent pronouncement|by a higher appellate authority or court alters the)above situations;expiry of reasonable period (say 6 months) or if the|assessee has not co-operated in the early disposalof appeal, or where a subsequent pronouncement|by a higher appellate authority or court alters the)above situations; (1) require an undertaking from the assessee that)he will cooperate in the early disposal of appealfailing which the stay order will be cancelled;he will cooperate in the early disposal of appealfailing which the stay order will be cancelled; (ul) reserve the right to review the order passed after|expiry of reasonable period (say 6 months) or if the|assessee has not co-operated in the early disposalof appeal, or where a subsequent pronouncement|by a higher appellate authority or court alters the)above situations;expiry of reasonable period (say 6 months) or if the|assessee has not co-operated in the early disposalof appeal, or where a subsequent pronouncement|by a higher appellate authority or court alters the)above situations; (ll) reserve the right to adjust refunds arising, ifany, against the demand, to the extent of the’amount required for granting stay and subject tothe provisions of section 245.”any, against the demand, to the extent of the’amount required for granting stay and subject tothe provisions of section 245.” 16.We will interpret the circular after referring to the impugned order dated 14.06.2016 read with the order dated 26.08.2016 on the’petitioner’s application for modification/clarification. These orders were passed on the petitioner’s application dated 16.05.2016to the firstrespondent. The application inter-alia referred to the stay application dated29.04.2016filed.beforetheASSeSSINgOfficerandVarlous|instructions/circulars issued by the CBDT. It stated that the said order passedby the Assessing Officer dated 09.05.2016 did not deal with the variouscontentions raised in the application for stay and that it was in thesecircumstances that the petitioner had filed the application before the Pr.CIT.The application thereafter proceeds to raise the preliminary objections as tothe jurisdiction and deals with the case on merits as well. The contentionswere presumably to establish a strong prima-facie case in support of theapplication for stay. The petitioner sought a stay of the entire demand. Alternatively,the petitioner submitted that the stay may be directed to be granted subject toits meeting a reasonable part of the demand not exceeding 15% of thedemand. This case was based essentially on the aforesaid circulars and inparticular the instructions contained in the Office Memorandum dated29 02 2016. 1/7.We mentioned earlier that one of the main reasons for rejectingthe assessee’s application for deduction under sections 80IJA and 80IB wasthat it did not maintain separate Dooks of account. We had by an order andjudgment dated 02.09.2016 in|The Commissioner of Income Tax, Panchkulav. M/s Micro Instruments Companyin ITA No. 958 of 2008 and other)connected matters held that it was not mandatory for an assessee to maintainseparate books of account in order to maintain a claim of deduction undersections 80IA and 80IB. We observed as under:- “29. Even as a matter of law, keeping separate books of|account is not a condition precedent to a claim for a| deduction under Section 80-IB. There was no statutory|provision making it mandatory for an assessee to|maintain separate books of account. That it may be easier|for an assessee to establish a claim for deduction under|section 8Q0- IB in the event of separate books of accountbeing maintained is another matter altogether. That is a|question of evidence and not a legal obligation. 30. Section 8Q0-IB itself does not expressly require anassessee to maintain separate books of account to|maintain a claim for a deduction thereunder. Nor do we|find anything in the section that implies such afrequirement. So long as an assessee fulfills all the|conditions stipulated in sub-section (2), the section would|be applicable. These conditions do not require an_assessee to maintain separate books of account in respectof the new undertaking. Nor does sub-section (3),|stipulate such a condition. As we will shortly see, where|an assessee is required mandatorily to fulfill a particular|condition, the legislature expressly included a condition|to that etfect. | 30. Section 8Q0-IB itself does not expressly require anassessee to maintain separate books of account to|maintain a claim for a deduction thereunder. Nor do we|find anything in the section that implies such afrequirement. So long as an assessee fulfills all the|conditions stipulated in sub-section (2), the section would|be applicable. These conditions do not require an_assessee to maintain separate books of account in respectof the new undertaking. Nor does sub-section (3),|stipulate such a condition. As we will shortly see, where|an assessee is required mandatorily to fulfill a particular|condition, the legislature expressly included a condition|to that etfect. | 31. AS we mentioned earlier, where an assessee keeps|separate books of account that fact would, along with|other facts, be relevant while considering whether the.assessee fulfills all the conditions of Section 80-IB and, in|particular, sub-section (2) thereof. It would be relevant,for instance, while considering whether the industrialundertaking concerned is formed by splitting up or a.reconstruction of a business already in existence or not. Ifseparate books of account are kept in respect of the new|industrial undertaking, it would certainly be a factor in)favour of the assessee. That, however, relates to the.question of evidence in support of the claim and not to/the statutory requirement to maintain separate books of|account.” 18.The petitioner has, therefore, made out a prima-facie caseon merits. Added to this is the fact that the petitioner is undergoing aliquidity crunch. The audit result indicates a loss of about41/59 crores. Certain agencies have downgraded the petitioner’s rating to the defaultcategory. These aspect would in our opinion justify a partial stay but not aStay of the entire demand. —19.Firstly, the petitioner’s financial difficulties indicate a need tosecure the Revenues outstanding claims. More important, prima-facie atleast even assuming that our judgment is applicable to the petitioner’s case,it is possible that the appellate authorities may remand the matter to enablethe Assessing Officer to consider the application for deduction afresh basedon the material available. It cannot, therefore, be stated at this stage thatthere is no possibility of any part of the claim for deduction beingdisallowed. We are, therefore, not inclined to grant a stay of the entiredemana. 20.The Pr.CIT rightly did not grant a complete stay but consideredthe petitioner’s application in the alternative for a stay subject to its paying15% of the outstanding demand in terms of the Oftice Memorandum dated29.02.2016. Considering the facts of the case, the financial position of thepetitioner and having regard to the said guidelines dated 29.02.2016, thePr.CIT granted the petitioner a stay of the demand till the disposal of theappeal before the CII(A) subject to the petitioner paying 15% of theoutstanding demand, namely,L41.64 crores in the installments stipulated.In paragraph-5, the petitioner’s request for adjusting a refund of=15.14crores in respect of the assessment year 2008-09 was accepted. The assesseewas accordingly directed to pay the balance amount of=26.18 crores invarying installments between 20[th]June, 2016 and 20[th]March, 2017. The!concluding portion of the order passed by respondent No.1 reads as under:- “o. It may be mentioned that installments in theinitial months have been kept at lower side considering|the assessee’s request for lower installments on account,of pressing financial position. The assessee shall make|the payment by 20[th]day of each month and furnish the.copy of the challan before the AO. On payment of 15% ofoutstanding demand as stated above, the assessee shall|not be treated as the assessee in default in respect of the|balance demand till the disposal of appeal of the learned|CIT(A) and the AO shall not take any coercive measure torecover the said demand. However, the Assessing Officer|is free to adjust any refund which may arise in favour ofthe assessee company in any assessment year.6.In case the assessee company does not|comply with the above directions and does not adhere to the above payments of installments, the AO shall be free|to take steps as per law to recover the demand.” 21.It is clear that the stay was granted subject to the assesseepaying the said amounts which constituted 15% of the total demand andnothing more. There is, however, a dispute regarding the last sentence inparagraph-5. It entitles the Assessing Officer “to adjust any refund whichmay arise in favour of the assessee company in any assessment year”. Thepetitioner contends that this liberty to adjust is only in respect and to theextent of the balance of the said 15%, namely,426.18 crores which was tobe paid in the said installments and on the other it could be to the extent ofthe entire demand. The Assessing Officer, however, interpreted the order to”mean that he was entitled to adjust the refund that the petitioner may beentitled to against the entire demand. This compelled the petitioner to seek aClarification before the Pr.CIT. The Pr.CIT by the said order dated26.08.2016 referred to the guidelines and to the previous order. In particular a reference was made to Clause-C of the original instructions dated02.02.1993 which reads as under:- “—<C GUIDELINES FOR STAYING DEMAND. (y (it)In granting stay, the Assessing Officer may impose|such conditions are he may think fit. Thus he may,-'such conditions are he may think fit. Thus he may,-' a)Require the assessee to offer suitable security ofsafeguard the interest of revenue;safeguard the interest of revenue; b)Require the assessee to pay towards thedisputed taxes a reasonable amount in lump sumor in installments;|disputed taxes a reasonable amount in lump sumor in installments;| CcRequire an undertaking from the assessee thathe will cooperate in the early disposal of appealfailing which the stay order wul be cancelled;he will cooperate in the early disposal of appealfailing which the stay order wul be cancelled; d)Reserve the right to review the order passed after|expiry of reasonable period, say upto 6 months,or if the assessee has not cooperated in the early|disposal of appeal, or where a_ subsequentpronouncement by a higher appellate authority orcourt alters the above situation,expiry of reasonable period, say upto 6 months,or if the assessee has not cooperated in the early|disposal of appeal, or where a_ subsequentpronouncement by a higher appellate authority orcourt alters the above situation, e)Reserve a right to adjust refund arising, tfany, against the demand.”any, against the demand.” After quoting the above provision, the order dated 26.08.2016. concludes as under:- “4, From the above instruction issued by the|CBDT, it is clear that for granting of stay of outstanddemand the Department may impose such conditions,|whichinter-aliq.includes thattheASS€SSINgOfficer/Department may reserve the right to adjust therefund arising, if any, against the demand. oS. In view of the above, the request of theassessee company to amend the stay order dated14.06.2015 ts hereby rejected.” e)Reserve a right to adjust refund arising, tfany, against the demand.”any, against the demand.” After quoting the above provision, the order dated 26.08.2016. concludes as under:- “4, From the above instruction issued by the|CBDT, it is clear that for granting of stay of outstanddemand the Department may impose such conditions,|whichinter-aliq.includes thattheASS€SSINgOfficer/Department may reserve the right to adjust therefund arising, if any, against the demand. oS. In view of the above, the request of theassessee company to amend the stay order dated14.06.2015 ts hereby rejected.” 22.The order dated 26.08.2016 does not clarify the order dated14.06.2016. It does not state that the order dated 14.06.2016 entitled theAssessing Officer to adjust the refunds against the entire demand. The ordermerely states that in view of Clause-C of the original instructions dated02.02.1993 the Department has a right to do so. This was not a clarification. 23.We will assume that the Department’s interpretation of theorders is correct. In any event the order dated 26.08.2016 does not construethe further Oftice Memorandum dated 29.02.2016. The Ottice Memorandumforms a part of the original instruction No. 1914 dated 02.02.1993. This isclear from paragraphs-1 and 4 thereof. Paragraph-4 expressly states that themodified guidelines contained in the Office Memorandum were being issued“in partial modification of the instruction No.1914”. Instruction No. 1914dated 02.02.1993 as clarified by instruction No.1914 dated 21.03.1996 must,therefore, be read together with the Office memorandum dated 29.02.2016.24.It is necessary now to interpret the Office Memorandum dated29.02.2016. Under clause-4A where the outstanding demand is disputedbefore the CIT(A), the Assessing Officer “shall” grant a stay of the demandon payment of 15% of the disputed demand unless the case falls in para-B ofClause-4. In the case before us, the demand is disputed before the CIT(A).The present case does not fall under para(B) either. Clause-4(B)(a) providesthat in a situation where the Assessing Officer is of the view that the natureof the addition resulting in the disputed demand is such that payment of alump sum amount higher than 15% is warranted, the Assessing Officer shallrefer the matter to the Administrative Pr.CIT/CIT who after considering allthe relevant facts shall decide the quantum/proportion of demand to be paidby the assessee aS lump-sum payment for granting a stay of the balance demand. Admittedly, a reference under clause 4(B)(a) was not made by theAssessing Officer to the Pr.CIT. In that event, Clause-4(A) alone wouldoperate. AS we mentioned earlier, clause 4(A) provides that where theoutstanding amount is disputed before the CIT(A), the Assessing OfficerGshallagrant stay of demand till disposal of the first appeal on payment of15% of the disputed demand. In other words, the Assessing Officer is boundto grant a stay of the entire demand on payment of 15% of the disputeddemand unless the case falls under category-B of clause-4. The AssessingOfficer is not entitled to insist upon the assessee depositing a higher amount.25.Faced with this, Mr. Putney relied upon clause-4(E)(iu). Hesubmitted that the Assessing Officer is entitled to impose such conditions as ©he thinks fit. A plain reading of the clause, however, militates against thesubmission on behalf of the Department. It entitles the Assessing Officer toreserve the right to adjust the refunds arising “to the extent of the amountrequired for granting stay.........” Therefore, the right to adjust the refulimited to the amount to be deposited by the assessee as a condition for theStay. — 26.The Assessing Officer in the order dated 26.08.2016 referred tosuidelines-C(il)(e) which we set out earlier. It provides that in granting astay the Assessing Officer may impose such conditions as he may think fitand that he may reserve a right to adjust the refund arising, if any, againstthe demand. However, this guideline stands modified by the OfficeMemorandum dated 29.02.1996 which entitles the Assessing Officer toreserve the right to adjust the refund arising “to the extent of the amountrequired for granting stay..........” . Clause-4 of the Office Memorexpressly stated that the guidelines therein were issued in partial modification of the instruction No. 1914. Thus guideline-C(e) of the originalinstructions dated 02.02.1993 stood modified by para-4(e)(ill) of the OfficeMemorandum. 2/.As we observed earlier in the present case by the impugnedorder dated 14.06.2016 the petitioner was required to deposit 15% of theoutstanding demand, namely,L41.64 crores. This figure attained finality. Atthe cost of repetition, the Assessing Officer did not refer the matter to theAdministrative Pr.CIT for an amount higher than 15% of the amount to bedeposited as a condition for stay. This infact indicates that the last sentencein paragraph 5 of the order dated 14.06.2016 granted the Assessing Officerthe right to adjust any refund which may arise in favour of the assessee inrespect and to the extent of the said 15% of the demand only. In any event,even if it entitles the Assessing Officer to adjust any refund against the entiretax demand, it would be contrary to the instructions of the CBDT containedin the Office Memorandum dated 29.02.2016. 28.Lastly, Mr. Putney submitted that the Assessing Officer hasunbridled powers under section 220(6) of the Act. However, in view of thecircular dated 02.02.1993 as clarified by the circular dated 21.03.1996 andmodified by the Ottice Memorandum dated 29.02.2016 the AssessingOfficer’s powers have been circumscribed to the extent provided therein. ©29.We quite see the force in Mr. Putney’s contention that thedepartment must safeguard its interest and that its interest may bejeoparadized if the petitioner is entitled to avail of the refund and at the sametime enjoy the benefit of the stay. However, the Department is bound by thecircular aS modified by the Oftice Memorandum. Had the circulars/Office Memorandum not been in force, it may have been a different matteraltogether. 30.In the circumstances, the writ petition is disposed of by holdingthat the petitioner shall be entitled to a stay of the demand subject to itsdepositing the installments as required by the order dated 14.06.2016 andthat the future refunds can be adjusted only to the extent of the balanceamount directed to be paid as a condition for the stay. The respondents shall, however, be entitled to withhold therefund(s) upto and including 31.10.2016 to enable them to challenge thisorder. 21.09.2016 |‘ravinder’ (S.J.VAZIFDAR)CHIEF JUSTICE (DEEPAK SIBAL)JUDGE, Whether speaking/reasoned √Yes/No Whether reportable √Yes/No